Fashion brands taking e-commerce route for India entry

Brands are choosing to avoid spending millions on stores, marketing and hiring talent, and are testing the market by stocking merchandise online.

New Delhi/Bangalore:Dorothy Perkins, a UK-based fast fashion brand for the youth, and another fashion label Miss Selfridges are making their India debut in the next few weeks. But unlike brands such as Zara and Forever 21 that have opened retail stores mostly in large cities, these brands will be available only via online fashion retailer Jabong.com.

As escalating real estate costs and complex regulations delay the entry of foreign brands into India, some brands are choosing to avoid spending millions on stores, marketing and hiring talent, and are instead testing the market by stocking their merchandise with specialist online retailers and marketplaces such as Jabong and Myntra.

Arun Mohan, chief executive and co-founder at Jabong.com, said over the past few months the company has had discussions with multiple fashion brands, largely European labels, that are keen on entering India. “These brands were even seeking potential partners to open brick-and-mortar stores, but online seemed to resonate better,” he said.

Some executives suggested that such associations would only work if the products are made locally as high import duties would make the brands unaffordable for consumers or unviable for the retailers.

“You can keep prices reasonable if you have a local sourcing partner, otherwise the customs duties, freight charges and other costs make it prohibitively expensive to sell international brands, even online,” said Arun Sirdeshmukh, chief executive and co-founder at online retailer Fashionara.

His company has been approached by international brands and is “trying to work out the economics and the pricing”, he added.

Jabong’s Mohan said the prices of Dorothy Perkins and Miss Selfridges, which include women’s western wear and accessories such as handbags and footwear, have been fine-tuned keeping in mind the Indian shopper. A mail sent to Arcadia Group Ltd, the British multinational retailer that owns these brands, did not elicit a response.

The online retailer will launch two more international brands in the country in the next few weeks and expects to launch a total of 50 foreign brands before the end of the year, said Ganesh Subramanian, chief operating officer at Myntra.

Earlier this year, India’s largest online marketplace Flipkart.com partnered with Motorola to launch the latter’s “MotoG” range of mobile phones in the country.

Revenues at e-commerce firms grew to Rs.13,900 crore in 2012-13 from Rs.1,500 crore in 2007-08, according to a January report by research and ratings agency Crisil Ltd. By 2016, the number could touch Rs.50,000 crore, it projected. The report put the current size of India’s organized retail market at around Rs.1.78 trillion.

“Brands would obviously prefer specialist online retailers rather than horizontal players,” Myntra’s Subramanian said. “If you’re a premium fashion brand and you’re entering a country, would you want to be on the same space as electronics, discount brands and all kinds of other products? Obviously not. Premium brands want the comfort that the site they are choosing has the right collection, image and capability to sell their merchandise,” he said.

The e-tailing route for international players is obvious, said Meheer Thakare, insights director, digital at market researcher IMRB International, as that saves significant time and money that an international entity would generally spend to enter via the traditional brick-and-mortar model.

Even though stringent policies govern retailing of foreign brands to Indian consumers, specially through brick-and-mortar stores, selling foreign brands to consumers via e-commerce remains an ambiguous area. Currently, the Indian government allows 100% foreign direct investment (FDI) only in business to business e-trading.

“It’s FDI compliant as these brands are selling wholesale to us and not selling directly to consumers,” said Subramanian at Myntra.